Caribou Coffee: Single-serve slowdown

Caribou Coffee's stock sank 15 percent Thursday as the company got whacked by a surprisingly large slowdown in the promising single-serve coffee market.

Business partner Green Mountain Coffee Roasters Inc., which makes single-serve Keurig coffee machines, reported results Wednesday that fell well short of forecasts. Then Caribou said Thursday that it expected its net sales in 2012 to grow 6 to 8 percent, not approximately 10 percent as previously forecast.

While the bulk of Caribou's sales come from its namesake coffeehouses, the Brooklyn Center-based company has a fast-growing business providing coffee for Keurig machines.

Caribou also dipped the expected range of its 2012 per-share earnings to 47 cents to 50 cents, down from 48 cents to 51 cents in its most recent guidance.

"I think they are being conservative, and they should be," said Mark Argento, a stock analyst with Craig- Hallum Capital Group.

Caribou's stock has been hot in the past year, rising 78 percent before Thursday's decline. Shares closed at $13.99, down $2.50.

The revised outlook was released with its quarterly earnings after the market closed Thursday. In after-hours trading, Caribou shares were around $13 a share.

Caribou's revised outlook came after Green Mountain shocked Wall Street with an ugly financial report late Wednesday. Its quarterly revenue of $885 million was almost $100 million below analysts' estimates, and the company scaled back its sales and profit outlook.

Green Mountain's stock lost almost half of its value Thursday, falling $23.65 to close at $25.87. Several other coffee stocks fell at least partly in reaction. Caribou, which has had a partnership with Green Mountain since 2007, got hit particularly hard.

Caribou sells green coffee beans to Green Mountain, which roasts them to Caribou's specifications and then markets a Caribou-branded single-serve product. Caribou gets a royalty on those sales.

About 22 percent or $17.5 million of Caribou's first-quarter sales came from its commercial segment, which includes its Keurig business and whole-bean sales through stores and food services.

Both businesses have been booming, and Caribou's overall commercial segment chalked up a 50 percent increase in sales during the first quarter compared with a year ago. Caribou's retail coffeehouse sales were $59.7 million, up 3.7 percent from a year ago.

Caribou posted net earnings for the quarter of $1.2 million, or 6 cents per share, down from $24.1 million, or $1.17, a year ago. However, 2011's first-quarter earnings included a $21.3 million tax benefit. Caribou's first-quarter revenue was $80.5 million, up 11.4 percent.